A Commodities Hedge Fund Titan Is Quitting After 50 Years

Blenheim Capital Management, once the world’s largest commodities fund, is being wound down as founder Willem Kooyker calls time on a 50-year trading career that earned him a gilded reputation in oil, metals and agricultural markets.

The majority of Blenheim’s investors have transferred their assets to a newly launched fund, Valence Asset Management, headed by his son, Terence Kooyker, and portfolio manager James Tatum. The fund launched this month and is staffed by about nine former Blenheim employees. It’s primarily active in base, precious and bulk markets, and trades in other commodities.

Tatum said in an interview that he developed a positive track record running the fund’s strategy within Blenheim, based in Berkeley Heights, New Jersey. Valence now seeks to bring in new investors, with a view to reaching around $800 million.

The closure of Blenheim marks the end of an era for Kooyker, who is 77, and the commodities hedge fund industry he helped pioneer. At its peak in 2011, Blenheim held more than $9 billion under management, putting it at the top of a league of funds that came to dominate commodity markets during the upswing of the 2000s, when China’s economy boomed.

Star Managers

The popularity of those funds — an elite circle that included Clive Capital and Red Kite — waned in the middle of this decade as China’s appetite for raw materials stabilized and then slowed, sending prices to multi-year lows.

Following years of losses and investor withdrawals, most of the star managers wound down their positions, leaving Blenheim as one of the last surviving commodity hedge funds. Still, its position was diminished, with assets under management falling to about $1.5 billion by 2016.

In the place of fundamental traders such as Kooyker, scores of low-profile, technically-focused quantitative investors are holding greater sway, much to the chagrin of the old guard, including Astenbeck’s Andy Hall and Red Kite’s Michael Farmer, who view them as a disruptive force and a source of unnecessary volatility in the commodities markets.

Quant Focus

With Valence, Tatum and the younger Kooyker plan to use quantitative analysis to support their fundamental trading to make the short-term disruptions in energy and metals markets easier to navigate.

“We believe staunchly that commodities, more than any other asset class, are still driven by fundamental economics,” Tatum said by phone. “Using quantitative analysis to help isolate those signals, the ability to generate alpha in these markets is as strong as it has ever been.”

Willem Kooyker began his trading career in his native Holland, and went on to lead the legendary trading house Commodities Corp. from New York in the 1980s. When he started Blenheim in 1989, the futures market for oil was still in its infancy and commodities as an asset class flew below the radar of generalist hedge funds and asset managers.

As Kooyker rapidly began to expand the fund with bold bets in the markets through the 1990s, external investors flocked to the fund, and capital came pouring in. While the elusive Kooyker kept himself outside of the public eye, his early trading successes at Blenheim helped to establish him as one of the industry’s most high-profile traders.
Source: Bloomberg